The gazetted Tax Procedures (Electronic Tax Invoice) Regulations 2024 have now been published. A previous proposal to exempt small businesses from eTIMS invoicing has been rejected. Under new eTIMS regulations, all businesses, regardless of their annual turnover, are now required to issue electronic invoices (eTIMS) as per Section 23 of the Tax Procedures Act.
“This regulation shall apply to any person carrying on business unless the person is exempted in accordance with section 23A of the Act,” is how a section of the eTIMS regulations reads.
Furthermore, Section 16 of the Income Tax Act, which governs deductible business expenses, applies to all businesses, not just a select few. In simpler terms, all businesses in Kenya must now use eTIMS for invoicing and adhere to the regulations outlined in both the Tax Procedures Act and the Income Tax Act.
Originally, the eTIMS regulations published in January had exempt resident businesses with an annual turnover below KES 5.0 million from issuing electronic invoices. The significant change had been made after a round of public participation. However, the government seeking to expand its tax base, has ignored the voice of the people and reverted to its initial proposal.
eTIMS Invoicing Exemptions
While eTIMS applies to most businesses, there are some helpful exceptions. Expenses involving withholding tax treated as a final tax (like dividends and interest) are exempt from eTIMS requirements. Secondly, services provided by non-residents with no permanent establishment in Kenya are also exempt. Further, under section 10 exemption is provided for employee salaries (emoluments), import activities, and internal financial adjustments within a business.
READ: Farmers Eye eTIMS Exemption After Special Committee Formed
Airline ticketing and financial transactions like fees charged by banks also don’t require eTIMS invoices. These exemptions aim to streamline the process and avoid unnecessary burdens for specific transactions often handled through separate reporting mechanisms.
